With plans for several projects underway, Morgans considers Santos has an attractive combination of growth and solid underlying fundamentals.
Part of the broker’s sector preference for the company is driven by a reduced (earnings/valuation) oil price exposure versus peers, despite having a comparable share price correlation to oil.
A third of the company’s business is in fixed-price gas, and a further 10% in 2021 is hedged with a floor of US$41/bbl. This means almost half of sales are protected against potential oil price volatility risk next year.
The Add rating is unchanged and the target price is increased to $7.05 from $7.00.
Target price is $7.05.Current Price is $6.35. Difference: $0.70 – (brackets indicate current price is over target). If STO meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges – negative figures indicate an expected loss).